Mortgages  

Wave goodbye to lowest five-year fixed rates

Wave goodbye to lowest five-year fixed rates

Research from Moneyfacts shows the lowest five-year fixed mortgage rates may already be a thing of the past.

With talk of a base rate increase in the near-future reaching fever-pitch, Moneyfacts has found five-year fixed rates have been particularly badly affected as the likelihood of a base rate increase within the next five years is high.

For instance, the average five-year fixed rate at 60 per cent loan-to-value has increased from 2.54 per cent to 2.66 per cent in the space of just two months, Moneyfacts found.

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Charlotte Nelson, finance expert at Moneyfacts, said: “While competition in the mortgage market remains high, it is clear that record low rates are starting to disappear.

“Borrowers have been in the habit of fixing for two years at a time, with many preferring to re-evaluate their deal on a regular basis. However, committing to a low five-year deal now is likely to pay off if base rate does rise - especially if there is a set of consecutive increases.

“For example, a small rise of just 0.25 per cent on today’s average standard variable rate (SVR) of 4.84 per cent would cost borrowers an extra £261.72 a year.

“Borrowers might feel as though they blinked and missed the lowest rates on the market as some deals only lasted a couple of months before they were withdrawn.

“For this reason, borrowers need to galvanize themselves now if they want to make the best of the low rates that are still around.

“Long-term fixed mortgage rates are still very low in comparison with a year ago, so borrowers who are sitting on their SVR or coming to the end of their mortgage deal need to decide whether they are willing to miss the opportunity to fix to a low rate.”

But Dale Jannels, managing director of Atom, said he wouldn’t wave goodbye to the lowest five-year fixed rates yet.

He said: “The problem is that no one knows what is around the corner. Yes, recent market issues have seen fluctuations in the cost of funding, but we are led to believe that a number of lenders are running way short of funding targets and as such, the last few months of the year could see yet more changes.”

emma.hughes@ft.com